LCIA Blog
Louisiana Coalition for E-Fairness Seeks to Level the Playing Field for Local Retailers
3/4/2015 2:07:16 PM

The following is an interview with Mark Strella, Program Manager with StayLocal. In addition to being a partnering organization to LCIA, StayLocal is one of the three organizations who make up the Louisiana Coalition for E-Fairness.

Please give a brief overview of the Louisiana Coalition for E-Fairness. What is your mission? How did the three organizations come together?

The Louisiana Coalition for E-Fairness is a partnership between StayLocal, Greater New Orleans, Inc., and the Louisiana Retailers Association. Our mission is to advocate for e-fairness legislation at the state and federal level that levels the playing field between online sellers and brick & mortar, without placing an undue burden on any businesses involved.

In May of 2013, the Senate passed the Marketplace Fairness Act by an overwhelming bi-partisan margin. It soon became clear that the bill would linger in the House, which was much more skeptical of the issue, so our groups came together to educate members of Louisiana’s Congressional delegation on this issue and to encourage their support for the bi-partisan Senate bill. The House never moved on the issue and the bill officially died, so we have to start over with the new Congress that started this year.

One of the key elements of our Coalition is the diversity of interests it reflects. We have business owners who are brick & mortar retailers that have been negatively affected by this issue for over a decade, but we also have business owners who sell online and want to be a part of the creation of a fairer system. We also have Parish Presidents, Mayors and economic developers who are seeing both the negative affects on the businesses in their area, as well as a correlation between this issue and sales tax revenues that aren’t keeping pace with the demands of a growing population.

How does the current online retail system put local businesses at a disadvantage? Who is most affected by our current system?

If you’re a brick & mortar business here in Louisiana, you’re required by law to play tax collector for your city/parish and state. So when you walk into a local store and buy a book, they’re required by law to tack on that sales tax on your purchase, and then pass it on to the relevant government.

Online sellers, on the other hand, are only required to collect sales tax on purchases coming from customers in states where their business has a physical presence. So, for example, if Amazon has a warehouse in your state, they’re required to collect sales tax on your Amazon purchases. But if they don’t have a physical presence, as in Louisiana, they aren’t required to tack on that sales tax to your purchases.

So what this means is right off the bat, a Louisiana business is put at an immediate price advantage compared to their online competitors because our government requires them, and not online sellers, to collect sales tax. Here in New Orleans, that’s an immediate 9% price disadvantage. This incentivizes shoppers to opt for buying something online and erodes the competitiveness of our local businesses.

Plus, it’s important to note that Louisiana has the third highest average sales tax rate in the country. The higher the sales tax, the more incentive shoppers have to shop online and save. So this is a particularly important issue in Louisiana.

Lastly, residents are also affected by this. Sales taxes fund our schools, public safety programs, our infrastructure, and so much more. If more and more people opt for online and don’t pay those taxes, and our governments are therefore not receiving those sales tax revenues, we’re either going to see declining quality or cuts to basic services that we rely on, or we’ll have to pay more taxes somewhere else.

Online shopping has been around for almost twenty years. Why hasn’t anyone fixed the problem yet?

This issue dates back to a 1992 Supreme Court decision that ruled that if a company doesn’t have a physical presence in a state, that state couldn’t require them to collect use tax. Part of the argument then was that the Internet was in its infancy, and to let it develop before dealing with tax issues.

Because of this ruling, not having to collect sales tax has been and remains one of online sellers’ key competitive advantages. Many online businesses have used it to grow and attract shoppers. So for a long time they’ve had, and most still have, a clear incentive to stop any "fix” to this issue.

But at the end of the day, competition between businesses in this country should be free and fair and based on the quality of the business and the service it provides to its customers, and not based on taxes that are arbitrarily imposed on some businesses but not others. No one should argue that it’s okay for businesses to use tax loopholes as a core part of their competitive strategy.

Another reason we haven’t seen a federal fix is that certain people claim that a "fix” to this issue is a tax increase, which couldn’t be further from the truth. Currently, if you shop online and don’t pay sales tax on that purchase, the law says that you’re supposed to report that on your tax filings and remit the sales tax you owe. Very few people actually do this. So a "fix” is really just better enforcement of a law that’s already in the books. Plus, in states where they’re worried about this being an increased tax burden, they’ve stipulated that any new revenue that comes in because of better collection of internet taxes be offset by tax cuts elsewhere, so people aren’t paying more.

While action at the federal level remains stalled, a number of states have implemented state-level rules that require certain online sellers to collect sales tax. For example, Amazon collects sales tax for nine states in which it doesn’t have a physical presence, because those state have passed laws that re-define how Internet sales are treated.

What programs does the Coalition for E-Fairness have planned?

We’re working on educating folks on the importance of this issue to our state’s economy and to the very integrity of our economy as a free and fair competitive system. We’ll also be encouraging our federal elected officials to take up legislation this year and fix this issue once and for all. We also plan on having conversations at the state level on what can be done here.

What does "E-Fairness” look like? What your ultimate goal?

The ultimate goal is for all purchases to be treated the same way from a sales tax standpoint, so there is no advantage or disadvantage between shopping online or shopping locally in terms of how much you’d have to pay in sales tax.

The best way this could come about is simple, common sense federal legislation. This system should be effortless to implement. Many of the businesses in our network are online businesses or are brick & mortar businesses that also sell online, and we want to ensure that no "fix” places an undue burden on these businesses. The software to implement sales tax collection for businesses, for example, should be painless to install and use.


How can Louisiana businesses get involved in the cause?

If you’re a Louisiana business owner who is affected by this issue, you can join the Coalition by reaching out to me by email, at mark@staylocal.org. We’d love to hear your story and loop you into our efforts.

Posted by: Nicholas Peddle | Submit comment | Tell a friend



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